Good morning, and welcome to Dana Holding Corporation's First Quarter 2012 Webcast and Conference Call. My name is Christie, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q&A session, will be recorded for replay purposes. [Operator Instructions] At this time, I would like to begin the presentation by turning the call over to Dana's Treasurer, Lillian Etzkorn. Please go ahead, Ms. Etzkorn.

Thank you, Christie. Good morning, ladies and gentlemen, and welcome to all of you who are joining us either by phone or webcast. On behalf of the entire Dana management team, I'd like to thank you for spending time with us this morning. With me this morning are Roger Wood, President and Chief Executive Officer; and Bill Quigley, Executive Vice President and Chief Financial Officer. Also in the room are Mark Wallace, Executive Vice President and President of On-Highway Driveline Technologies. Before we begin, I'd like to review a couple of items. Copies of this morning's earnings release and the slides that we will be using have been posted on Dana's investor website for your reference. Today's call is being recorded, and the supporting materials are the property of Dana Holding Corporation. They may not be recorded, copied or rebroadcast without our written consent. Today's call will also include a Q&A session. In order to allow as many questions as possible within our time frame, please keep your questions brief. Finally, today's presentation includes some forward-looking statements about our expectations for Dana's future performance. Actual results could differ materially from those suggested by our comments here. Additional information about the factors that could affect future results are summarized in our Safe Harbor statement. These risk factors are also detailed in our SEC filings, including our annual, quarterly and current reports with the SEC. With that, I'd like to turn the presentation over to Roger Wood.

Thank you, Lillian, and good morning, everyone. I'm pleased to report our strong financial results for the quarter, it being our fourth consecutive quarter of positive net income of $70 million. Our EBITDA growth again outpaced our sales by a significant amount. But before we get into the quarterly highlights, I want to acknowledge another important win for the Dana team just this week. On Monday, we were honored with a PACE Innovation Partnership award for our collaboration with Ford Motor Company for introducing our new active warm-up technology to the marketplace. This technology, which can improve a vehicle's fuel economy by up to 4%, was also a finalist for a PACE Award. This recognition of our work with Ford affirms to us that we're creating market-driven innovative technologies and truly partnering with our customers to deliver these breakthrough innovations to the marketplace. It's an honor to share this award with Ford. We've work closely with them since the days of the Model T and we're pleased to be collaborating on innovations nearly a century later. Now back to our quarterly results. Our first quarter revenue was up nearly 12% over last year before the currency impact. Even with the currency impact, we finished the quarter at nearly $2 billion, which is 9.8% over last year. Each of our business units has felt the impact of currency translation and we expect this trend to continue. Dana's strong operating performance in the first quarter resulted in EBITDA improvement to $212 million, representing a 17% increase versus last year. Our EBITDA margin of 10.7% is up more than 68 basis points compared to last year. Our improved margin performance reflects several factors, including the initial results of our new LEAN operating model, the realization of our new technology product launches and the…

Great. Thanks, Roger, and good morning, ladies and gentlemen. Slide 13 provides a summary of Dana's 2012 first quarter financial performance with a comparison to the same period a year ago. As highlighted on this slide, Dana posted a strong quarter's earning, $70 million in net income and delivering a diluted adjusted earnings per share of $0.44, a 30% improvement from the first quarter of last year. Sales were about $2 billion for the quarter, reflecting an increase of nearly 10% compared to the prior year. As Roger mentioned, while our sales were impacted by lower commercial vehicle volumes in South America, as well as in favorable currency, strength in other regions and across our business segments offset these headwinds. Adjusted EBITDA for the quarter was $212 million, improving $31 million or 17% over the prior year. EBITDA margin rose to 10.7% in the first quarter, representing a 60 basis point improvement over the first quarter of 2011, as well as over 100 basis point improvement sequentially from the fourth quarter of 2011. Capital spending in the quarter was $34 million about even to a year ago, and free cash flow before the $150 million voluntary U.S. pension cash contribution we made in January of this year, was a use of $37 million, slightly higher than a year ago. Overall, we are very pleased with these results and in the next several sides, we'll provide some additional color around our first quarter results. Slide 14 provides a comparison of our consolidated sales for 2012 and 2011, as well as a change by business segment and the key year-over-year drivers of the change. Sales in the quarter were nearly $2 billion, an increase of $177 million or about 10% compared to a year ago. On a sequential basis, sales increased about…

[Operator Instructions] Your first question comes from the line of Brian Johnson of Barclays.

I have a couple of questions just drilling down into the segments. The first is in CV. Can you give us any sense of the magnitude of the pricing and cost reduction versus volume drivers within that segment?

Yes, Brian. This is Bill Quigley. Obviously, there's been a lot of attention and a lot of work done in the commercial vehicle business within Dana. And as you know obviously from a material recovery perspective, we're working very hard in that segment. While not, obviously, providing real value, if you will, around what those numbers are, make no doubt about it, the team has continued that recovery initiative. We obviously have seen an increase in volumes during the quarter and -- really coming from our North American market, as well as unfavorable mix in Europe, but again those recovery initiatives are ongoing. And we expect as we move forward on commercial vehicle, that we're moving more from a, I would say fix-it position to a more continuous improvement position going forward.

Okay. And -- so does that mean we can sort of expect this to continue even if, say, production for like a PACCAR were to moderate going forward in the next couple of quarters.

Yes, I think that probably is an overall reasonable assumption to make, Brian.

And over -- within Power Technologies, was there any backlog or is there -- is kind of the backlog going to come in through the year, because that business seemed to have been growing faster than European and North American production for some of last year even with -- and even with the currency headwinds, are you just not growing faster than the market, so we should think of this more as a kind of production growth or are there sort of new signings that come on later in the year?

Yes, Brian. It is Bill again. I think -- to your point, on Power Technologies, year-over-year we were slightly up or flat actually, $1 million, I believe. We've seen some softening in Europe in particular around the aftermarket business. But I think with respect to your base question, we do not attribute this to new program wins moving forward. Obviously the team is focused on new business wins and in fact are procuring those wins. So again I don't think it's something that we would see as a static environment for the rest of the year.

And on the Light Vehicle Driveline, I'm trying to separate, when you say material recovery, do you mean raw material recovery, or do you mean a material recovery in the profit margin? And if so, kind of with commodities sort of flattish, just how mechanically should we be thinking about those commodity recoveries?

Brian, it's Mark Wallace. We talked a little bit back in Q1 that we had pressure in the castings and the bar stock that was moving through the end of last year, into Q1. Those were considered for us noncontractual commodity recoveries. So we've gone out to retrieve that and we expect that to flow in, in Q2 and Q3, as well as a recovery mechanism.

Okay. So even though -- I remember you saying that even though scrap and basic steel was flattish, you were seeing it in those specifics what you need for the driveline materials?

Yes.

Your next question comes from the line of Peter Nesvold of Jefferies.

So the margin headwinds in Power Technologies did lift in one quarter as you said last time. Light Vehicle Driveline, any sense for how soon the material recovery flows through and the mix starts to get a little bit better, could it be as quickly as one quarter?

No. Actually, it'll be steady over the balance of this year, but sequentially we'll continue to make improvements Q2 through Q4.

Okay. Other cash flow. So you talked a little bit about that -- the variation year-over-year of $27 million, $15 million was some normal contributions. Should we expect this kind of $27 million type year-over-year headwinds to continue as the year progresses or was there anything else within that number that might have been kind of onetime-ish this quarter?.

No, I think -- it's Bill Quigley. But for that $15 million pension contribution, and it's the normal contribution to our plans, I think that's just kind of ambient level of movements in our assets and accruals, so I don't think it's -- you can take that number necessarily and move it forward at a 4x. Recall though, from a cash contribution perspective, we made the $150 million special contribution in the U.S. plan in January. And we have obviously disclosed that normal contributions outside of that plan contribution are about $73 million for the full year 2012. So we'll see obviously that line, which will largely be additional pension cash contributions, moving forward.

Okay. Last quick one and I'll hand it off. So at the Investor Day, it seemed like there was some caution maybe in the Class 8 number given the strength that we had been seeing late into the end of 2011. Since then we saw PACCAR cut some production, we've seen the Class 8 orders moderate a little bit, kind of still hanging around 20,000. Do you still think that there's cushion, sort of, in how you're looking at the number or do you think that the forecast is more right sized now?

Peter, it's Mark Wallace. Again I think our approach to this year for North America, we felt like there would be some softening this year. So I think our 280,000 to 290,000 for production this year should be in line with what we're seeing now from the market space.

Your next question comes from the line of Patrick Archambault of Goldman Sachs.

Hi, this is actually Adi Oberoi for Pat. So first question more on the housekeeping side. It looks like your FX contribution margins were negative 23% for the quarter. Is that a good estimate going forward?

This is Bill Quigley. I think, that captures both translation as well as transaction. So your point, it was about a 23% impact, if you will, in the quarter on a year-over-year basis. Probably a touch high because obviously transaction losses outside of a translation occur based on flows between jurisdictions, so -- I think it probably more of a 20%, recognizing we'll probably have some transaction losses and/or gains during the course of the year, but probably a touch high for the first quarter recognizing it includes both translation and transaction.

Got it. That's helpful. The second question is on the Brazilian market. I know you -- at the Mid-American Trucking Show you guys were saying that you're seeing second quarter also panning out similar to the first quarter where the demand is like down 10-ish percent. How are you thinking about that now and any color on the rest -- for the second half of the year also would be helpful.

It's Mark Wallace. Again on Brazil, as reflected back in Q1, we continued to see soft production in Q2. However, it'll be up sequentially over Q1. Full year we have Brazil down 10%, it's reflected a little bit different when we look at South America. We do have some improvements in some of the other countries in production. So full year, down about 5% to 6% for South America on a year-over-year basis. But again about 10% down year-over-year in Brazil.

Your next question comes from the line of John Lovallo of Merrill Lynch.

When we're thinking about the seasonality in the business, I mean is it still fair to assume that 2Q and 3Q will be seasonally strong or has that impact -- or has that kind of seasonality diminished with vehicle launches being spread out through the year?

John, Mark Wallace again. I think overall, we should see continuing improvements in Q2 and Q3 in revenue, again a bit tempered with Europe in the third quarter, typically it's softer due to vacation periods that occur.

John, this is Bill. I think just to further Mark's comment, obviously we would expect the second quarter to be an uplift from a sales perspective from the first, and to Mark's point, you get that tail kind of going back off to the third to the fourth. So nothing unusual I think in the seasonality this year vis-à-vis last year.

Great, That's helpful.

I'm sorry, this is Roger. I think your point is well taken. I think the seasonality adjustments that we're seeing may be a bit muted, they're still there a little bit, but probably not as dramatic as in past years.

Very helpful. If I could sneak one more in here. I mean you guys have certainly -- have done a lot of collaboration with Ford in the past and one of the things that Ford has been talking about is cutting somewhere around 750 pounds from a vehicle. I'm just wondering if you saw any opportunity for Dana in that regard.

John, this is Roger. We obviously collaborate very closely with Ford and have for many, many, many years. And as I illustrated in my remarks, we got the innovation collaboration award from the PACE event the other night, which we're very, very proud of. We work with Ford very closely on all of their applications for all of their objectives, I mean weight savings is a huge objective that they have, but they also have performance objectives on some of the other components and we're working with them across the board. We have opportunities in products from a weight savings perspective and we also have opportunities in products from a performance, fuel economy and emissions perspective as well. So we have a great relationship with Ford and very much value that.

Your next question comes from the line of Emmanuel Rosner of CLSA.

It looks like your equity income from the joint ventures was flat year-over-year and that's despite the fact that in the meantime you've added about 46% of DDAC ownership. Can you please comment on what you're seeing in DDAC in terms of the demand environment, also what the margins look like and maybe how we could see that evolve over the rest of the year?

Emmanuel, it's Mark Wallace again. Overall, I mean China has seen a significant decline in revenue in -- and especially in January, February time frame in the heavy and medium duty truck market. We saw a nice rebound in March and we're expecting volumes to continue elevated over the start of this year, but now we're looking at a 5% year-over-year decline in the heavy duty and medium duty truck market in China. But we still are working with our partner at Dongfeng to continue to improve our internal margins through additional cost reductions, as well as looking at the other portions of business which includes the bus and coach business, which we're out driving for additional revenue improvement there as well.

Okay. Great. Regarding your tax rate, it looks like it was a little bit above the one you assumed for the effective tax rate for the year. Are you still comfortable with the 29% for the year?

Yes, we are actually -- this is Bill Quigley. You're right, a touch above the 29%, at above 35% or so, really around intra-period allocations on the accounting standards. We are comfortable with the 29% effective rate on a full year basis.

So any idea which quarter will be well below 25% or so -- well below 29% as a result.

Well you do see muting as you move forward with respect to the movements of profits during the course of the year. But obviously the fourth quarter, you also get, when you square up if you will, given our tax positions in the U.S. So on a full year basis, it will be about 29%. We're still pretty comfortable with that.

Perfect. And I guess finally, I didn't see any mention in the slides for your outstanding guidance for 12% margins in 2013. Are you still comfortable with achieving that?

The margin and 2013 expectation, yes, we are comfortable with achieving that and we feel like we're on a good track to get there.

Your next question comes from the line of Patrick Nolan of Deutsche Bank.

I just had a couple of questions. Looking at the walks you provided on 14 and 15, in the other line, the $18 million positive. I'm a little surprised that such a low drop-through considering what the positives in revenue would have been, considering the pricing increases in commercial vehicles, some of the catch-up recoveries for raw materials. Is there some other large negative in other that's offsetting those positives?

I think on the top, the $18 million, that is basically kind of a pure number obviously from a recovery perspective, be it material recovery and/or pricing. So obviously as we continue to renegotiate contracts and have been, I think, quite successful in doing that. Over the course of the year, there are still probably some impacts to come, but this is the pure, if you will, pricing/material cost recovery.

Was there any offset to that on the cost side that dragged -- I figured those things would have a very high drop-through.

You see the -- I think you see the offset if you take a look at the change in adjusted EBITDA. You see the $4 million versus the $18 million. Obviously you've got some commodity current increases, which we'll then, obviously as we move forward, look to recover. There's a lag obviously with respect to our recovery mechanisms and approaches with customers, and then concurrently to Roger's point, we have made some additional investments if you will from an engineering perspective to move the company really into 2013 and forward. So you're seeing that on any particular quarter, you're going to see kind of a flow from a material perspective. You may have a commodity pressure that you ultimately recover in the forward periods, as well as then you're recovering material cost from prior periods in the current period. So there is a mix, but you can see the $18 million was kind of the recovery top and the net bottom line improvement was about $4 million between, obviously, commodity cost increases, as well as some of the investment we've made in the business.

Okay. On the off-highway business you've made mention in the fourth quarter call that you saw some need to have to get some pricing adjustments in the agricultural side of the business. Have we already seen the benefit of that or is that still kind of to come in Q2 and Q3?

Well, I think some of the work that's been done toward the end of last year, we've seen some of the benefit of that, but there is more benefit that will come later in the year, Patrick.

So a way to think about that, that kind of moderates some of the volume headwinds you'll see in the back half?

From a margin perspective, correct.

Yes. That's exactly right.

And just one last quick one if I could sneak it in, do you have the Dongfeng joint venture income in the quarter?

Yes, it's -- obviously, it's recorded in the quarter. I think that number was about $2 million, equity income.

Your next question comes from the line of Joseph Spak of RBC Capital Markets.

Just a quick question on some of your outlooks for the market. I know you raised the North American light vehicle assumption, but I noticed you kept the truck component of that flat. Does that imply that we -- on the light vehicles we should see better growth over the course of the year in Power Technologies which has more of the passenger car exposure versus light vehicle drive on?

This is Bill Quigley. I think to your point obviously PT has got more presence, if you will, in that light vehicle or passenger car market. We obviously have taken it up, but it's not I would say a significant penetration in a particular platform. Mostly some uplift, but I don't think it's of a material amount.

Okay. And then I guess in Light Vehicle Driveline -- the margin, you had been pointing to continued issues in Thailand. First, can you confirm that, that's completely behind us now and then also was there any impact in the quarter that sort of brought those margins down a little bit?

Joseph, this is Mark Wallace. Again I think Thailand, pretty much in Q2, as we mentioned before, back earlier this year, that we expected that would be back to a normal run rate since what we're seeing at this stage. So overall, there's really no significant impact in Q1.

There was no impact in Q1. Okay. And then finally, just housekeeping, the CapEx, I know you kept that guidance -- first quarter was pretty low, so that run rate gets you well below what you're guiding to for the year. Is it fair to assume that the remainder of the CapEx is split evenly between the next 3 quarters or is there some quarter where we should see sort of greater investment?

Yes -- no, no. Traditionally and historically the first quarter is a little bit low and -- this is Roger, sorry. And it will be lumpy throughout the year and it's going to correspond to the new products. We mentioned in the script part of the call that we have won a number of new business awards and the capital spending is going to be lumpy depending on where those products are launching. So it's not going to be evenly split.

Your next question comes from the line of Brett Hoselton of KeyBanc.

When you talked about Light Vehicle Driveline margins kind of rebounding back to prior levels, I'm kind of thinking high 9% range or something along those lines, kind of an increase of 100 basis points or something, which is what you did in 2011. Is that kind of what you have in mind?

Yes, this is Bill, Brett. I think that is obviously a reasonable assumption to be making as we kind of progress through the year based on what we performed last year. Obviously the first quarter was a dip, but again Mark's been focused on that steady improvement during the rest of 2012.

And then with the nice improvement in the Commercial Vehicle margins. The Light Vehicle Driveline business is now kind of, let's say at the low end of the totem pole in terms of margins. And my question is, I mean you've done a very nice job of kind of going through your different segments and addressing the margins here. And what I'm wondering is, as we think about Light Vehicle Driveline margins hovering around that high 9% range or so, is there the -- do you have plans or thoughts that you might be able to push those margins up into that 11% range or so, roughly equivalent to some of the other segments? Or do you think that in general, the Light Vehicle Driveline margins are going to be lower than the other segments by 100 to 200 basis points?

I think Mark Wallace's team has done a very nice job at both the Commercial segment and the light vehicle segment in managing it, but they are 2 different segments in the marketplace. And we're approaching both of these segments in the same way, focused on the market value drivers that the end customer is going to be able to see and be able to value. It's a fairly substantial part of our business right now that allows us the ability to introduce technologies into this segment and carry them over into the other segments. And so I think the simple answer to your question, Brian, is that we're not looking at that segment right now any differently from a focused standpoint than the other segments, but it's a bigger business and a bigger base to work off of as we go forward, so -- we have the same metric expectations of every single one of our businesses in Dana and that's no exception. So as we go forward, I would expect the product introductions in that segment to perform similar to the product introductions in the other segments.

And then as I think about the 12% margin target that you just referred to a little while ago here, how should I think about that margin target? Is your expectation that you're hoping to achieve 12% margins through the entire year in 2013 or is it that we hope to hit a margin of 12% at some point in time in 2013, kind of ramping up, maybe exiting 2013 at that 12% level?

Yes, I think -- this is Bill. I think with respect to that objective for 2013 moving forward, that was obviously a margin objective that was set, what, 2 years ago or so, or late last year and -- or earlier last year. And I think as we move forward, we're looking at that, that was a full year. But obviously as was progress through the course of 2011 into -- or 2012 and into 2013, it's certainly isn't a ceiling for us, some would suggest it's a floor, but again we're progressing the margins of the business year-over-year. 2013 will be no different than the work that we're trying to do in 2012, so I think it's -- I wouldn't say it's necessarily an exit rate with respect to 2013. We position it internally as a full year objective.

Yes, I think if I could add to that -- this is Roger, that we have been primarily focusing over the last year on the actions necessary to make sure that we've got the concrete actions to meet that objective that we've got out there. We feel comfortable at that now and we're convinced that a lot of the activities that have been put in place with us to deliver what we've delivered in the first quarter puts us on a great track to get there for the full year. As Bill had mentioned earlier, this year, it looks like it's on track and he suggested that we would be at the upper end of what we have previously mentioned to you guys. The upper end of that range that is out there, puts us right on the track to be where we need to be in 2013.

Christie, we have time for one more question.

Your final question comes from the line of Tim Denoyer of Wolfe Trahan.

A couple of little ones. I just wanted to confirm -- on Brazil specifically, you had mentioned that the 2Q has stayed fairly soft in the truck market, but if we look at the March numbers, it looks like on an annual rate it was up -- back up to almost 90% of last year's rate. Am I misreading that or are you not going to see a pretty decent improvement in Brazil revenue in 2Q versus 1Q and can you comment on the margin impact that, that might have as Brazil comes back?

Yes just -- it's Mark Wallace, Tim. Again you're correct, we are seeing the volume lift in Q2. And year-over-year it looks to be in line with last year roughly and we'll see that production continuing into Q3 up and then it may soften in, in Q4, again getting a year-over-year reduction of about 10% roughly. And again, I think we've said it before, margins were in line, kind of where we're -- in general where we're at with the CV margins.

Okay. So -- but overall, I think with that business coming back up, do you see a little bit of margin, a little bit benefit in 2Q versus 1Q, is that fair?

Yes, one -- Tim, maybe just to address it a little bit more. Number one, we definitely expect that the Brazil will improve the revenue side, but we also will see softening in Europe as well because we had a higher Q1 than we were expecting and we'll see those revenues soften into Q2 and Q3 as well. So yes, we do have lift in South America or in Brazil specifically, but you'll see softening in the opposite direction in Europe. So overall, it may mitigate each other.

Okay, great. And then one last one on the CV business in terms of the -- some of the new products that were introduced. I know that the driveshaft was introduced in first quarter and I believe the new Pro-40 axles are coming in the third quarter. Can you confirm that and give us any sense on what sort of percentage of -- I believe that's just in North America at this point, any rough share of North America that you're expecting that to represent?

Yes. Tim, actually as we mentioned back at Mid-America, we launched the Diamond Series driveshaft, really gets going in production and -- starting now, but really starts in Q3, Q4. The Pro-40 we'll launch at the end of this year. So it's not a significant impact this year, but really it begins to be the driver as we look into 2013 and 2014, to continue driving our commercial vehicle margins up. So it's not significant again in this year.

Tim, this is Roger. Just to build on Mark's comments, we're really excited about these products because they absolutely deliver what these fleet owners and the customers are expecting in terms of the technology for them. So we're launching it this year, the exposure we got at the Mid-America Truck Show on these technologies was terrific and we're excited about the future opportunities, but this year in 2012, it really is a launching year for these new products that we'll see the benefit of in a more significant way in future years.

And with that I'd like to conclude this morning's call. Thank you to everybody for joining us.